Keyes v. Deutsche Bank National Trust Co.
921 F. Supp. 2d 749
E.D. Mich.2013Background
- Plaintiffs occupy the property at 8444 Jack Pine Dr., Ypsilanti, MI and signed a mortgage with MERS as nominee for the lender when purchasing in 2006; note later sold to a REMIC trust (HIS Asset Securitization Corp. Trust 2007-NCI) with Deutsche Bank as trustee; plaintiffs did not receive notice of the transfer.
- In 2009, plaintiffs stopped payments after requesting proof of the right to collect; foreclosure proceedings began in 2010, with Bank of America named as servicer in 2012, though it’s unclear how that happened.
- Plaintiffs allege that Deutsche Bank’s assignment of the mortgage to the Trust and the servicing arrangement with Bank of America render foreclosure improper, and contend Bank of America lacked authorization to service.
- Trott & Trott initiated foreclosure; no foreclosure sale has occurred; plaintiffs seek injunctive relief and various remedies including quiet title and claims of wrongful foreclosure, breach, conversion, slander of title, and civil conspiracy.
- Defendants removed to federal court; Deutsche Bank and Bank of America move for judgment on the pleadings; the court will grant in part and deny in part, dismissing most claims against both parties except count III (conversion) against Bank of America.
- Court considers documents attached to pleadings (PSA, mortgage, assignment, note, and related letters) and applies Rule 12(b)(6) standards, including plausibility as required by Twombly/Iqbal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of wrongful-foreclosure claim under 600.3204 | Plaintiffs contend improper assignment and lack of ownership/authority to foreclose. | Defendants argue statute-compliance is satisfied; Bank of America may foreclose as servicer; assignment issues are addressed but do not invalidate process. | Wrongful-foreclosure claim under 600.3204(3) fails; 600.3204(3) requires record chain at sale, which has not occurred. |
| Validity of the assignment to Deutsche Bank as trustee | Assignment invalid due to statute of uses, MERS authority, and separation of note and mortgage | PSA/database supports authority; assignment valid as to trustee rights | Assignment validity challenged but claims fail; statute of uses generally inapplicable; MERS authority supported; no cognizable defect shown. |
| Statute of uses applicability to REMIC trust | REMIC trust constitutes passive trust; statute 555.5 may void conveyance to trustee | PSA shows trustee duties; statute does not apply to existing trusts; even if applicable it would vest security in investors, not invalidate the transfer | Statute of uses argument fails; PSA indicates non-passive trust duties; even if applicable, transfer not invalidated. |
| Separation of note and mortgage as basis to challenge enforcement | Note separated from mortgage invalidates enforcement; transfer to trust improper | Residential Funding v. Saurman allows foreclosure by entity holding mortgage even if not note holder; note-mortgage separation not fatal | No cognizable claim based on note-mortgage separation; court relies on Saurman holding to reject these challenges. |
| Conversion claim against Bank of America | Bank of America converted funds by collecting payments without authorization | PSA designates predecessor as servicer; BOA authorized to service under PSA | Conversion claim survives at least on the pleaded facts; it is the sole viable claim against Bank of America. |
Key Cases Cited
- Residential Funding Co., LLC v. Saurman, 490 Mich. 909 (Mich. 2011) (foreclosure by advertisement allowed by holder of mortgage even if not note holder)
- Livonia Props. v. 12840-12976 Farmington Road Holdings, LLC, 399 F.App’x 97 (6th Cir. 2010) (record chain of title not destroyed by assignment irregularities; third-party standing limitations)
- Kim v. JPMorgan Chase Bank, N.A., 493 Mich. 98 (Mich. 2012) (foreclosure defects are voidable, not void ab initio; prejudice required to set aside sale)
- Gregory v. Citimortgage, 890 F.Supp.2d 791 (E.D. Mich. 2012) (ambiguity in note-notice language; context matters for disclosure obligations)
- Cable v. Mortgage Electronic Registration Systems, Inc., 2012 WL 2374236 (E.D. Mich. 2012) (MERS authority and role as nominee; pleading sufficiency under PSA)